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People on the left tend to think that the system we have now is proof that the right’s approach doesn’t work, since it’s a private health-care market and costs are out of control. But we actually don’t have a consumer-driven market in health insurance today; what we have is more like a government-dominated market. A consumer-driven market would be one in which consumers make spending decisions and so producers have an incentive to give them what they want at a competitive price. But our system today is dominated by three government programs or policies that prevent the emergence of such consumer pressure: Medicare, Medicaid, and the tax exclusion for employer-provided insurance. Each of these means that consumers do not make direct purchasing decisions, and each of them contains an enormous incentive to spend more, and therefore pushes costs up.

Whole thing here. The sixth issue of National Affairs can be found here.